Will Rising User Base Continue to Drive Axon's Software & Services Unit?

Axon Enterprise, Inc. AXON is benefiting from strong momentum in the Software & Services segment. An increase in the aggregate number of users to the Axon network is supporting the segment’s performance. After witnessing a year-over-year 33.4% jump in revenues in 2024, revenues from the segment increased 39% in the first quarter of 2025 and grew 38.8% in the second quarter.

Strong momentum in digital evidence management and rising demand for premium add-on features are driving the segment’s performance. Also, the adoption of premium subscription plans continues to grow as more customers recognize the value of enhanced capabilities. Existing customers are consistently returning to purchase additional services, reflecting strong customer satisfaction and engagement. This recurring activity is helping Axon grow its base of annual recurring revenues (ARR), supporting long-term growth.

With nearly 70% of AXON’s domestic user base still on basic plans, the Software & Services segment is positioned for substantial future growth. New product innovations are also driving growth, with customers showing rapid adoption of offerings such as Draft One and the OSP 10 premium bundle.

The company’s ongoing expansion of its ecosystem through AI-driven tools, digital workflows and subscription-based models positions the Software & Services segment for sustained growth. With considerable room for user upgrades and offerings that align closely with customer needs, the segment is set to remain a key driver of Axon’s near-term success.

Segment Snapshot of AXON's Peers

Among its major peers, Woodward, Inc.’s WWD Industrial business segment reported net sales of $319 million in the third quarter of fiscal 2025, down 3.2% year over year. Woodward generated 34.9% of its total sales from this segment in the quarter. The decline in revenues for Woodward’s segment is primarily due to lower on-highway volume in China.

Another peer, Teledyne Technologies Incorporated’s TDY Digital Imaging segment’s second-quarter 2025 revenues increased 4.3% year over year to $771 million. Higher revenues were augmented by increased demand for Teledyne’s unmanned air systems and commercial infrared imaging components. Teledyne generated 50.9% of its total revenues from this segment in the quarter.

AXON’s Price Performance, Valuation and Estimates

Shares of Axon have surged 96.8% in the past year compared with the industry’s growth of 36.2%.

From a valuation standpoint, AXON is trading at a forward price-to-earnings ratio of 656.9X, above the industry’s average of 49.93X. Axon carries a Value Score of F.

The Zacks Consensus Estimate for AXON’s third-quarter 2025 earnings has been on the rise over the past 60 days.

The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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